CFTC Sends White House Two Rules on Event Contract Swaps

What happened

The Commodity Futures Trading Commission has sent the White House two rules that would redraw the legal definition of a swap around event contracts, the wagers that pay out on yes-or-no outcomes at platforms such as Kalshi and Polymarket. The Office of Information and Regulatory Affairs, the White House arm that reviews federal rules before publication, received both on Sept. 28, according to listings logged by the Office of Management and Budget.

The first filing is a proposed rule, RIN 3038-AF82, that would name event contracts inside the definition of a swap. It will head to public comment. The second is an interim final rule, RIN 3038-AF81, that would keep casino-style gambling products out of the same definition and could take effect upon approval. The CFTC classified both as not economically significant, and their full text is not yet public. The OMB listings carry no rule text or description of what the agency counts as a casino-style product.

A proposed rule goes out for public comment before it can take effect. An interim final rule generally takes effect when it is published, with comments collected afterward. Once OMB completes its review, the CFTC can publish the rules in the Federal Register.

Why it matters

The swap label is the center of a jurisdictional fight. If event contracts count as swaps, they fall under the CFTC's authority, which Chairman Michael Selig has argued is exclusive, putting the platforms beyond the reach of state gambling regulators. Multiple states have sued prediction-market operators over alleged illegal gambling, and the CFTC has countersued to block that oversight.

The rulemaking follows conflicting appeals-court decisions. On Sept. 25, a unanimous Sixth Circuit panel ruled that Kalshi had not shown its sports contracts were swaps, and that federal law would not preempt Ohio's and Tennessee's gambling laws even if they were. The Ninth Circuit sided with Nevada in August, and in April the Third Circuit went the other way and sided with Kalshi against New Jersey.

New Jersey has asked the Supreme Court to settle the question, and the agency has taken at least nine states to court over limits on event contracts. New York sued Polymarket last week seeking to ban it within its jurisdiction, echoing an earlier action against Kalshi. By writing the swap definition itself, the CFTC is trying to settle in regulation what courts and states have fought case by case.

Background

In June, the CFTC and the Securities and Exchange Commission jointly asked for comment on clarifying swap definitions. SEC Chairman Paul Atkins said the step was long overdue for issues that include event-based products, and CFTC Chairman Michael Selig said the request offered a chance to address longstanding ambiguities in Title VII of Dodd-Frank.

A third CFTC item is also pending at OMB: a prerule titled Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets, received Sept. 17.

Regulator scrutiny continues on other fronts. The CFTC is investigating former Rep. Adam Kinzinger over Kalshi bets tied to his own pardon, and it issued an advisory warning against "mention markets," saying contracts that settle on whether a named person says certain words should be presumed readily susceptible to manipulation.

What is still unclear

• Neither listing is marked economically significant and no rule text is public, so it is not yet known what the agency counts as a casino-style product.
• The filings signal intent, not final rules, and both could change during OMB review or public comment.
• Whether courts will accept the CFTC's reading of the swap definition remains unsettled, given the conflicting circuit rulings.

Questions readers ask